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Minister Coffey Mulls Consolidation of U.K. Water Companies

(Bloomberg) -- The U.K. minister in charge of water suggested the government could push for consolidation among the 25 private companies in the industry.

“We have this curiosity that we have these huge companies and we have these absolutely tiny companies -- Bristol Water, Cambridge, South Staffordshire,” minister Therese Coffey told a Social Market Foundation think tank event at the Conservative Party annual conference. Consolidation could help ensure security of supply and infrastructure, she said.

Water has risen up the political agenda after the opposition Labour Party set out more detailed plans to nationalize water utilities at its own conference last week, saying the current chief executives would be replaced with new bosses hired on reduced salaries, while more control would be given to workers, local authorities and customers.

Coffey said the U.K. regulator, Ofwat, has “historically never wanted to change” the make-up of the industry, adding that consolidation could only happen “if you were going to have a big revolution in the way the industry operates.”

Under Labour’s plan, new Regional Water Authorities would take control of the existing water and sewerage companies, while existing shareholders would receive bonds as compensation.

Shadow Chancellor John McDonnell said a state takeover was justified by a 40 percent increase in water bills in real terms since 1989, when the companies were privatized. Higher bills, coupled with increasing leakage means “we can’t afford to not take them back,” McDonnell said.